The Truth About Payment Plans

As the real estate market declines with the rest of the economy, more and more families like yours find themselves facing foreclosure. The Michigan foreclosure process is a very complex and expensive process for lenders; in an attempt to stem of the flow of funds lost during foreclosure, many lenders say they are offering solutions, usually in the form of a loan modification or a plan to repay the amount past due (in arrears).

I just wanted to take a moment to talk a little bit about repayment plans. Often the plans offered by lenders require a considerable amount of money due immediately (we’re talking thousands of dollars). Most homeowners find themselves in a default situation because of a financial hardship, resulting in a loss of liquid assets, or cash on hand. This makes a large initial payment all but impossible.

Also, most repayment plans consist of fractionalizing the amount in arrears, and adding that smaller amount onto the monthly payments. For example, if a your mortgage payment is $1000/month, and your are two months behind, the amount in arrears would be $2000, plus any penalties or late fees. A lender may then offer a repayment plan that requires $200 down initially, adding $200 to the payments for the next nine months, making those payments now $1200.

If you are in a temporary financial hardship, this may be a viable solution. However, if you find yourself in an ongoing hardship, this option is likely not be feasible.

If you find yourself in a similar situation, give us a call to discuss what your other options may be at this point to get you back to better times as fast as possible.


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